Zoo Entertainment saw a 63% drop in revenue from $9.8 million at this time in 2010 to $3.7 million in Q2 2011. The net loss for Q2 was $10.1 million, compared to a yearly loss of $965,000.

Mark Seremet, CEO of Zoo Entertainment, attributes the results to a “rough” transition to full digital distribution. However, he stated, “we remain very optimistic about our future and are ready to fully expand our new digital business.” He also commented that the results from this quarter were “largely in line with our expectations.”

Zoo’s latest title, Kona’s Crate, was released on iOS and Android this summer. According to Seremet, it has been doing well with over 150,000 downloads.

However, Zoo still has to contend with a class-action lawsuit investors recently filed, accusing the publisher’s executives of issuing “”materially false and misleading statements” concerning financial statements.

Analysis: Zoo Games was infamous among those of us that worked at Diehard GameFAN. They published such titles as Chrysler Classic Racing and Army Men Soldiers of Misfortune, which were on the receiving end of various applications of sarcasm. Though to their credit, they have also released decent titles like Puzzle Kingdoms. Considering that releases from Zoo have petered out in more recent years, I can’t say I’m surprised about the financial results, nor about the move to digital releases. Between the net loss and the lawsuit, Zoo has a lot on their hands, and the chances of them recovering from these blows are nebulous.